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CREATIVE LEARNING CLASSES II PU ANNUAL EXAMINATION APRIL-MAY-2022 ACCOUNTANCY KEY ANSWERS SECTION A (1 MARK ANSWERS) 1. SOCIETY 2. b) 2 3. 1.Time Factor 2. Nature of Business 3. Efficiency of Management 4. False 5. When a partner retires continuing partners can get some gain/benefit of the retired partner’s share, the Ratio in which old partners got the benefit is called Gaining Ratio (Benefit Ratio) 6. Death of a Partner 7. The shares of a shareholder will be forfeited when there is a failure on the part of the shareholder to pay the allotment money or call money due on the shares. 8. Debenture Redemption Fund Investment (DRFI) 9. Statement of Profit and Loss and Balance sheet. 10. Horizontal Analysis 11. Sundry Creditors / Bills Payable / Out Standing Expenses 12. d) All the Above Section B 13. A not-for-profit organization is an organization that focuses on a particular social cause, and all the money earned or donated is used in pursuing its objectives and meeting operational costs. Unlike for-profit corporations, 14. Fluctuating Capital System is the method where interest on capital, salary, commission, or any other types of remuneration payable to partners are directly credited to partner’s capital account, drawings & interest on drawings are debited; here current accounts are not prepared, and the Capital amounts are not fixed, 15. Reasons for Admission of a partner 1) To secure additional capital. 2) To secure additional managerial skill. 3) To Expand Business 4) To increase the Goodwill of the firm 16. Realization A/C .........................................DR To Sundry Assets A/C 17. 1. Authorized Capital 2. Issued Capital 18. The following are the limitations of financial statements: 1. Dependence on historical costs 2. Financial Statements Are Not Adjusted for Inflation 19. Two techniques of Financial Statement Analysis. 1. Comparative Statements. 2. Common size Statement. 20. 1. The most important objective that is fulfilled by preparing Cash Flow Statement is to ascertain the gross inflows and outflows of cash and cash equivalents from various activities. 2. Secondly, Cash Flow Statement helps in analyzing various reasons responsible for change in the cash balances during an accounting year. Section C 21. DR P&L Appropriation A/c for the year ending 31-03-2021 Cr To Interest on capital, By P&L A/C X 10% x 2,00,000 = 20,000 ( Profit before adjustment) 80,000 Y 10% x 1,50,000 = 15,000 35,000 To Salary to Y 4,000 By Interest on drawings , To Commission to X 2,000 X = 2,000 Y = 1,000 3,000 To Partners capital A/C, X (3/5) = 25,200 Y (2/5) = 16,800 42,000 83,000 83,000 22. Date Amount period Product 01-04-20 6,000 12 72,000 30-06-20 8,000 09 72,000 01-12-20 9,000 04 36,000 31-03-21 2,000 00 00,000 1,80,000 interest on drawings= total product X Rate X 1/12 180000X10/100X1/12 Rs. 1500 23. Sacrifice Ratio = Old Profit Sharing Ratio – New Profit sharing Ratio Raja =5 1 = 15 – 08 = 7 8 3 24 24 Kiran =3 1 = 09 – 08 = 1 8 3 24 16 Therefore Sacrifice ratio = 7 : 1 24. DR Sonu’s capital A/C CR By Balance b/d 25,000 By Reserve Fund (1/4 x 24,000) 6,000 To Sonu’s Executors Loan A/C. 47,125 By Interest on Capital (balance transferred) 10% x 25,000 x 3/12 625 By Mallik’s A/c = 6,000 By Pallavi’s A/c = 6,000 12,000 By P & L Suspense A/c 3,500 47,125 47,125 Sonu’s share of Goodwill = 12,000 Gained by Mallik and Pallavi in 1 : 1 Ratio Mallik’s share = 1/2 x 12,000 = 6,000 Pallavi’s share = 1/2 x 12,000 = 6,000 Journal entries in the books of Shreshta company limited Date Particulars DR CR 1) Bank A/C ................................................................ DR 3,00,000 To Debentures Application A/C. 3,00,000 (Being Application money received on 20,000 debentures of Rs 15 each) 2) Debentures Application A/C ......................................... DR 3,00,000 To 5% Debentures A/c. 3,00,000 (Being Application money transferred to 5% Debentures A/C) 3) Debentures Allotment A/C ................................................ DR 8,00,000 To 5% Debentures Capital A/c. 8,00,000 (Being Allotment money transferred to 5% Debentures A/C) Bank A/C ................................................................ DR 4) To Debentures Allotment A/C. 8,00,000 (Being Allotment money received on 20,000 debentures of Rs 8,00,000 40 each) 5) Debentures I st & Final Call A/C. 9,00,000 To 5% Debentures Capital A/c. 9,00,000 (Being I st & Final Call money transferred to 5% Debentures) 6) Bank A/C ................................................................ DR 9,00,000 To Debentures I st & Final Call A/C. 9,00,000 (Being Allotment money received on 20,000 debentures of Rs 45 each) 26) Balance sheet of Lakshmi. Co. ltd as at 31sMarch 2021 as per Schedule III of the Companies Act 2013 Note No Rs SOURCES OF FUNDS (EQUITY/LIABILITIES) I SHARE HOLDERS FUND a) Share capital 1,70,000 b) Reserves and Surplus 1 1,20,000 II NON CURRENT LIABILITIES a) Long term Borrowings 1,20,000 III CURRENT LIABILITIES a) Trade Payables 70,000 TOTAL 4,80,000 APPLICATION OF FUNDS (ASSETS) I NON CURRENT ASSETS a) Fixed Tangible Assets 2,50,000 II CURRENT ASSETS a) Inventories 80,000 b) Cash or cash equivalents 1,50,000 TOTAL 4,80,000 Note 1: Reserves and Surplus Statement of Profit or Loss 50,000 General Reserve 70,000 1,20,000 27) Current Ratio = Current Assets = 1,44,000 = 1.38 (1.38 : 1) Current Liabilities 1,04,000 Quick Ratio = Quick Assets = 90,000 = 0.87 (0.87 : 1) current Liabilities 1,04,000 28. Cash Flows from Operating Activities (In-direct Method) Particulars Amount Net Profit Before Tax and Extra Ordinary Items 5,00,000 Deductions already made in Profit and Loss on account (+) Depreciation 2,00,000 (–) Profit on Fixed Assets - 50,000 Operating Profit before Change in Working Capital 6,50,000 (–) Increase in Current Assets (Trade Receivable) - 40,000 (+) Increase in Current Liabilities + 60,000 Net Cash From Operating Activities 6,70,000 Section D (12 Marks) 26) DR Income and Expenditure A/C for the year ending 31/03/2021 CR Expenditure Rs. Income Rs. To Salary 22,000 By Subscription 26,000 Add O/s Current year + 3,400 Less: O/s Last year - 2,400 Less O/s Last year - 6,000 19,400 Add O/s Current year 4,000 To Postage 1,000 Less Adv Current year - 2,000 25,600 To General Expenses 400 To Lighting Charges 2,000 By Sale of Old newspapers 400 Add O/s Current year + 500 2,500 By Sports Fees 2,400 To Depreciation on Assets 13,000 By Rent Received 12,000 To Surplus 4,100 40,400 40,400 Balance-Sheet as on 31/03/2021 Liabilities Rs Rs Assets Rs Rs Capital fund 64,000 Furniture 18,000 + Entrance Fees 6,000 Add Purchases 20,000 + Surplus 4,100 74,100 Less Depreciation - 1,000 37,000 Building Donation 40,000 Sports Material 35,000 O/S Salary 3,400 Add Purchases 14,000 O/S Lighting 500 Less Depreciation - 12,000 37,000 Investments 30,000 Advance Subscription 2,000 Cash 12,000 O/S Subscription 4,000 1,20,000 1,20,000 30. Dr Revaluation A/C Cr To Depreciation on Machinery 1,500 By Old P.D.D 3,000 To Depreciation on Furniture 1,000 By Appreciation on Building 9,000 To New P.D.D 6,000 To Old partners capital A/C Akhila’s capital 2,100 Bhagya’s capital 1,400 3,500 12,000 12,000 Dr Partners Capital A/C Cr Particulars Akhila Bhagya Chan Particulars Akhila Bhagya Chan To P & L A/c 9,000 6,000 By balance .b/d 80,000 40,000 -- To Cash A/c 18,000 12,000 By Gen Reserve 18,000 12,000 -- By Cash A/c 18,000 12,000 40,000 To balance c/d 91,100 47,400 40,000 By Revaluation 2,100 1,400 -- 1,18,100 65,400 40,000 1,18,100 65,400 40,000 New Balance – sheet as at 01-04-2021 Liabilities Rs Rs Assets Rs Rs Capitals Land & Building 60,000 Akhila’s Capital 91,100 Add Appreciation 9,000 69,000 Bhagya’s Capital 47,400 Chandana’s Capital 40,000 1,78,500 Furniture 20,000 Less: Depreciation - 1,000 19,000 Creditors 48,000 Bills Payable 20,000 Machinery 30,000 Less: Depreciation - 1,500 28,500 Debtors 60,000 Less: New P.D.D - 6,000 54,000 Stock 20,000 Cash at Bank 16,000 Add: Akhila’s Cap + 18,000 Add: Bhagya’s Cap +12,000 Add: Chandana’s Cap + 40,000 Less: Akhila’s Cap - 18,000 Less: Bhagya’s Cap - 12,000 56,000 2,46,500 2,46,500 31. Dr Revaluation A/C Cr To Depreciation on Machinery 1,000 By Appreciation on Stock 6,000 To Depreciation on Furniture 750 By Appreciation on Building 10,000 To New P.D.D 4,200 By Old P.D.D 2,000 By Partners capital A/C Abhay’s capital 4,820 Bhuvan’s capital 4,820 Chetan’s capital 2,410 12,050 18,000 18,000 Dr All Partners Capital A/C Cr Particulars Abhay Bhuvan Cheta Particulars Abhay Bhuvan Cheta To Chetan’s A/c 2,000 2,000 -- By Balance .b/d 60,000 50,000 40,000 -- By Reserve Fund 12,000 12,000 6,000 To Cheta’s Loan -- -- 53,410 By P & L A/c 2,000 2,000 1,000 To Balance c/d 76,820 66,820 -- By Abhay’s A/c -- -- 2,000 By Bhuvan’s A/c -- -- 2,000 By Revaluation 4,820 4,820 2,410 78,820 68,820 53,410 78,820 68,820 53,410 New Balance – sheet as at 31-03-2021 Liabilities Rs Assets Rs Capitals Land & Building 80,000 Abhay’s Capital 76,820 Add: Appreciation 10,000 90,000 Bhuvan’s Capital 66,820 1,43,640 Machinery 20,000 Less: Depreciation - 1,000 19,000 Chetan’s Loan 53,410 Furniture 15,000 Less: Depreciation - 750 14,250 Creditors 30,000 Stock 30,000 Bills Payable 10,000 Add: Appreciation 6,000 36,000 Debtors 42,000 Less: P.D.D -4,200 37,800 Cash 40,000 2,37,050 2,37,050 32. DR Realization A/c CR To Sundry Assets By Sundry Liabilities Stock 10,000 Loan 3,000 Furniture 4,000 Creditors 3,000 6,000 Debtors 20,000 Plant & Machinery 22,000 56,000 By Cash/Bank A/c Stock 9,000 To Cash/ Bank A/C Furniture 3,500 12,500 Loan 3,000 Creditors 3,000 By Mohan’s A/c Realization Expenses 500 6,500 Machinery Taken Over 25,000 By Punith’s A/c Debtors Taken Over 18,000 By Partners capital A/C Mohan’s capital 750 Punith’s capital 250 1,000 62,500 62,500 Dr Partners Capital A/C Cr Particulars Mohan Punith Particulars Mohan Punith To P & L A/c 9,000 3,000 By balance ….b/d 40,000 20,000 To Realisation A/c By Reserve Fund 6,000 2,000 (Asset Taken over) 25,000 18,000 To Realisation A/c (Loss) 750 250 To Cash /Bank A/C 11,250 750 46,000 22,000 46,000 22,000 Dr Cash /Bank A/C Cr To Balance b/d 6,000 By Realization A/c 6,500 To Realization 12,500 By Mohan’s capital 11,250 A/c By Punith’s capital 750 18,500 18,500 33. Issue of shares entries in the books of Hema Company Date Particulars DR CR 1) Bank A/C ............................................................... DR 4,00,000 To Equity share Application A/C. 4,00,000 (Being Application money received) 2) Equity share Application A/C ..................................... DR 4,,00,000 To Equity share Capital A/C. 4,,00,000 (Being Application money transferred to capital A/C) 3) Equity share Allotment A/C ..................................... DR 10,00,000 To Equity share Capital A/C. 9,00,000 To Security Premium A/c. 1,00,000 (Being Allotment money is due) 4) Bank A/C ............................................................... DR 10,00,000 To Equity share Allotment A/C. 10,00,000 (Being Allotment money received) 5) Equity share I st & Final Call A/C ............................... DR 8,00,000 To Equity share Capital/C. 8,00,000 (Being Calls money due) 6) Bank A/C …………………19,400 x 40 ....................... DR 7,76,000 To Equity share I st & Final Call A/C 7,76,000 (Being I & Final Call money received) 7) Equity share Capital A/C ………(600 x 100) ................ DR 60,000 To I st and Final call A/C. (Calls in Arrears) 24,000 . To Forfeited shares A/C 36,000 (Being forfeiture of 600 shares of Rs 100 each Due to nonpayment of I st & Final Call money. ) 8) Bank A/C ……………………(600 X 80) .................... DR 48,000 Forfeited shares A/C ....................................................... DR 12,000 To Equity share Capital A/C. 60,000 (Being re-issue of forfeited shares at Rs 80 each) 9) Forfeited shares A/C .................................................. DR 24,000 To Capital reserve A/C. 24,000 (Being The balance of forfeited shares A/C is transferred to capital reserve A/C.) 34. Journal Entries Date Particulers Amount Amount a) Bank A/c ........................................................................ Dr. 2,00,000 To Debenture Application & Allotment A/c 2,00,000 (Debentures Application & Allotment money received) Debenture Application & Allotment A/c .................... Dr. 2,00,000 Loss on Issue of Debentures A/c ................................. Dr. 10,000 To Premium on Redemption of Debentures A/c 10,000 To 10% Debentures A/c 2,00,000 (Debentures Application & Allotment money transferred to Debentures account and Premium on Redemption transferred to Loss on Issue of Debentures A/c) b) Bank A/c ........................................................................ Dr. 1,90,000 To Debenture Application & Allotment A/c 1,90,000 (Debentures Application & Allotment money received) Debenture Application & Allotment A/c .................... Dr. 1,90,000 Loss on Issue of Debentures A/c ................................. Dr. 10,000 To 10% Debentures A/c 2,00,000 (Debentures Application & Allotment money transferred to Debentures account and Discount on issue of Debentures transferred to Loss on Issue of Debentures) c) Bank A/c ........................................................................ Dr. 2,10,000 To Debenture Application & Allotment A/c 2,10,000 (Debentures Application & Allotment money received) Debenture Application & Allotment A/c .................... Dr. 2,10,000 To 10% Debentures A/c 2,00,000 To Security Premium A/c 10,000 (Debentures Application & Allotment money transferred to Debentures account and Premium on issue transferred Security Premium A/c, ) d) Bank A/c ........................................................................ Dr. 2,10,000 To Debenture Application & Allotment A/c 2,10,000 (Debentures Application & Allotment money received) Debenture Application & Allotment A/c .................... Dr. 2,10,000 Loss on Issue of Debentures A/c ................................. Dr 10,000 To 10 % Debentures A/c 2,00,000 To Security Premium A/c 10,000 To Premium on Redemption of Debentures A/c 10,000 (Debentures Application & Allotment money transferred to Debentures account and Premium on Redemption transferred to Loss on Issue of Debentures A/c ) 35. Common size Balance Sheet of Surya . Co Particulars 31/03/2020 % 31/03/2021 % Rs Rs EQUITY AND LIABILITIES: I 1) Shareholders’ Fund Share capital 8,00,000 50.00% 9,00,000 50.00% Reserves & Surplus 1,00,000 06.25% 60,000 03.33% II 2) Non-Current Liabilities: Long term borrowings 5,00,000 31.25% 6,00,000 33.33% III 3) Current Liabilities: Short term borrowings 1,50,000 09.38% 1,80,000 10.00% Trade Payables 50,000 03.12% 60,000 03.33% Total Equity and Liabilities 16,00,000 100% 18,00,000 100% ASSETS: I 1) Non-Current Assets: Tangible Assets 7,00,000 43.75% 8,00,000 44.44% Intangible Assets 5,00,000 31.25% 6,00,000 33.34% II 2) Current Assets: Inventories 1,00,000 06.25% 1,50,000 08.34% Cash and Cash Equivalents 1,50,000 09.38% 1,70,000 09.44% Other Current Assets 1,50,000 09.38% 80,000 04.44% Total Assets 16,00,000 100% 18,00,000 100% 36. 1. Inventory Turn Over Ratio = Cost of Revenue from Operation Average Inventory = 7,00,000 1,00,000 = 7 Times 2. Trade Receivable Turn Over Ratio = Net Credit Revenue from Operation Average Trade Receivables = 7,50,000 1,50,000 = 5 Times 3. Trade Payable Turn Over Ratio = Net Credit Purchase Average (Creditors + B/P) = 5,00,000 2,00,000 = 2.5 Times 4. Gross Profit Ratio = Gross Profit x 100 Net Sales = 3,00,000 x 100 10,00,000 = 30% 5. Operating Profit Ratio = Operating Profit X 100 1. Net Sales = 2,00,000 X 100 10,00,000 = 20 % 6. Net Profit ratio = Net Profit X 100 Net Sales = 1,00,000 X 100 10,00,000 = 10 % Working Notes Revenue from Operation = Net Sales 2. Operating Profit = Gross Profit – Operating Expenses =3,00,000 – 1,00,000 = 2,00,000 Section E 37. In absence of partnership deed, the following provision of Indian Partnership Act, 1932 are to be applied (a) – Profit and losses are to be shared equally (b) – No interest is to be allowed on capital (c) – No interest is to be charges on Drawings (d) – Interest on Advance from Partners @ 6% p.a simple interest (e) – No remuneration is to be allowed to any of the partners 38. DR P&L Appropriation A/c for the year ending 31-03-2021 Cr To Interest on capital, By P&L A/C X 10% x 2,00,000 = 20,000 ( Profit before adjustment) 80,000 Y 10% x 1,50,000 = 15,000 35,000 To Salary to Y 4,000 By Interest on drawings , To Commission to X 2,000 X = 2,000 Y = 1,000 3,000 To Partners capital A/C, ( Profit After adjustment) X (3/5) = 25,200 Y (2/5) = 16,800 42,000 83,000 83,000 39. Statement of profit and loss of a Company. For the year ending Particulars Amount I. Income 1. Revenue from operations (Sales) 10,00,000 Total Income 10,00,000 II. Expenses 2. Purchases 4,00,000 3. Changes in inventories 2,00,000 4. Employee benefit expenses 1,00,000 5. Other expenses 2,00,000 Total Expenses 9,00,000 Profit Before Tax 1,00,000 9. Tax 30,000 Profit After Tax 70,000 40. Comparative Income statement Particulars 31/03/2020 31/03/2021 Increase/ % Decrease Net Revenue from Operations 5,00,000 8,00,000 3,00,000 60% Add Other Incomes 50,000 60,000 10,000 20% Total Revenue (A) 5,50,000 8,60,000 3,10,000 56.36 Cost of material consumed 1,00,000 1,50,000 50,000 50% Purchase of stock in trade 2,00,000 3,00,000 1,00,000 50% Changes in Inventory Employees benefit Expenses 40,000 60,000 20,000 50% Depreciation & Amortizations 10,000 15,000 5,000 50% Financial cost Other Expenses Total Expenses (B) 3,50,000 5,25,000 1,75,000 50% Profit Before Tax (C) = (A - B) 2,00,000 3,35,000 1,35,000 67.5% Less Tax Expenses @ 30%(D) 60,000 1,00,500 40,500 67.5% Profit After Tax (E) = (C - D) 1,40,000 2,34,500 94,500 67.5% ****************************************************************************************** PREPARED BY, ASHWINI C L DEPT OF COMMERCE HKS PU COLLEGE HASSAN